Southwest Engineering Co. v. Martin Tractor Co., Inc.

Brief Fact Summary. Company 1 bid on a contract to build a lighting system for the United States Corps. of Engineers.  In preparing its bid, company 1 received a price quote for a generator from company 2.  After the United States Corps. of Engineers accepted company 1's bid, company 2 increased its price for the generator and subsequently refused to perform.

Synopsis of Rule of Law. "[W]here parties have reached an enforceable agreement for the sale of goods, but omit therefrom the terms of payment, the law will imply, as part of the agreement, that payment is to be made at time of delivery."

Facts. The Plaintiff, Southwest Engineering Co. (the "Plaintiff"), is a general contractor.  The Defendant, Martin Tractor Co. (the "Defendant") was a subcontractor.  The Plaintiff was interested in April 1966, in submitting a bid to the United States Corps. of Engineers to construct certain runway lighting facilities at an air force base.  Prior to submitting their bid, on April 11, 1966, Mr. R.E. Cloepil ("Mr. Cloepil"), an employee of the Plaintiff called Mr. Ken Hurt ("Mr. Hurt"), an employee of the Defendant to ascertain the price of a standby generator and accessory equipment.  On April 12, 1966, Mr. Hurt called Mr. Cloepil and told him the price would be $18,500.  On April 14, 1966, the Plaintiff submitted their bid, which included the $18,500 figure quoted by Mr. Hurt.  The Plaintiff was notified on April 20, 1966 that their bid was accepted.  During a meeting on April 28, 1966, Mr. Hurt, speaking for the Defendant, raised the price of the generator to $21,500. Mr. Cloepil on behalf of the Plaintiff assented to this change.  The parties never agreed to how payment was to be made.  Then, in a letter from Mr. Hurt to Mr. Cloepfil dated May 24, 1966, Mr. Hurt informed the Plaintiff that they could not proceed with the sale and that the verbal quote was withdrawn.

Issue. Under the Uniform Commercial Code ("UCC"), can a contract be formed even if the parties have not agreed to all the terms?

Held. Yes.  The court first recognized that Kansas's enactment of UCC §2-204(3) reads:  "Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy."  The court went on to recognize that omission of even an important term does not undercut the existence of a contract.  Since the missing term here concerns the time and place of payment, K.S.A. 84-2-310 will supply the missing term.  This § states:  "Unless otherwise agreed[:]  (a) payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery".

Discussion. The UCC breaks away from the common law "Mirror Image Rule" and allows a contract to be recognized although contracting parties have not agreed to all the terms.